¶1. (C) SUMMARY: The Philippine Senate and House recently
agreed to exclude the disputed Spratly Islands from the
country’s baselines, defining them instead under the terms of
the UN Convention on Law of the Sea as a “regime of islands”
— although still subject to Philippine claims. President
Arroyo has indicated that she will sign the bill into law
soon. Notwithstanding Chinese diplomatic protests over the
Philippines’ Spratlys claims, the accomodation achieved in
the Philippine Congress appears to offer the best hope of
moderating tensions in Southeast Asia over the disputed
islands, while defusing past charges in the Philippine
Congress and the media that the Arroyo administration has
performed inadequately in defending Philippine sovereignty
over these islands. According to Malacanang Palace,
President Arroyo is slated to discuss the issue with PRC
Premier Wen Jiabao at the upcoming ASEAN summit in Thailand.
END SUMMARY.

BACKGROUND
———-

¶2. (C) The Spratly Islands, some 100-230 islets, atolls,
coral reefs, and seamounts spreading over 250,000 square
kilometers on the South China Sea, are the object of
overlapping sovereignty claims by China, the Philippines,
Vietnam, Taiwan, Malaysia, and Brunei. Although the Spratlys
encompass less than five square kilometers of land area, the
likely presence of oil, gas, and other mineral resources has
kept the islands in the forefront as a regional irritant.
The 2002 ASEAN-China Declaration on the Conduct of Parties in
the South China Sea lowered tensions in the region, and in
2005, the Joint Marine Seismic Undertaking (JMSU) agreement
among China, Vietnam, and the Philippines coordinated
“pre-exploration” of possible hydrocarbon reserves.
Following allegations of kickbacks and corruption (reftel B),
the Arroyo administration had little choice but to allow the
JMSU agreement to lapse when in expired at the end of June
¶2008.

¶3. (C) As a party to the UN Convention on Law of the Sea
(UNCLOS), the Philippines must define its territorial
baselines prior to a May 13 deadline, if it is to later claim
an extended continental shelf (ECS). Beginning in 2007, the
Philippine Senate and House of Representatives have taken
very different views regarding the definition of national
boundaries under UNCLOS. In August 2007, a bill was filed in
the Senate that would delineate the Philipines’ boundaries
along the same lines as the 1898 Treaty of Paris whereby
Spain ceded the Philippines to the United States, leaving the
Spratlys defined as a “regime of islands” outside the
baselines. However, the Philippine House of Representatives
soon passed its own version of a baselines bill that
expressly included both Scarborough Shoal and the Spratlys
within the country’s territorial baselines.

¶4. (C) With legislators increasingly aware of the
approaching UNCLOS deadline, the Philippine Senate and House
passed their differing versions of the baselines bills on
January 28 and February 2, respectively. Following
often-heated public debate in both Congress and the media, on
February 9 a bicameral panel hashed out a compromise measure
that hewed closely to the Senate’s version, while offering a
nod to supporters of the House bill by adding the phrase
“under the Republic of the Philippines” to the Senate’s
description of the Spratlys as a regime of islands. On
February 17 Congress unanimously passed this compromise bill.

COMMENT:
——–

¶5. (C) The Arroyo administration had long favored the Senate
position of not including the Spratlys within the nation’s
baselines, partly out of a desire not to inflame tensions in
the region, and partly out of recognition that the
Philippines lacks the military capacity to defend the
Spratlys, if it should ever come to that. It also cannot
have escaped the Arroyo administration’s notice that,
although the UNCLOS cannot be used to settle border disputes,
the majority of the Spratlys lie with the Philippines’
200-mile Exclusive Economic Zone (EEZ) granted under UNCLOS,
while none appear to lie within China’s or Taiwan’s EEZs or
extended continental shelves (ECSs). President Arroyo has
indicated her intention to sign the compromise bill into law,
notwithstanding China’s strong diplomatic protest on February

MANILA 00000428 002 OF 002

¶18. She is likely pleased that this outcome satisfies
Philippine obligations under UNCLOS while mollifying House
hardliners, and she no doubt hopes that — despite its
diplomatic growling — China will likewise be placated.
President Arroyo will have a face-to-face chance to gauge
Chinese reaction at the February 28 – March 1 ASEAN summit in
Thailand, where the countries’ leaders will meet.
KENNEY